New Pacific Launches 1st China Executive Survey
Shanghai, China, February 11, 2008 --(PR.com)-- New Pacific Consulting has launched the first of an ongoing series of bi-weekly qualitative surveys with their executive sounding board comprised of leaders of multi-national companies operating in China. The initial “Executive Sounding Board” series increases the sample to include 100 China based executives. This report includes members of the sounding board, as well as invited guests of New Pacific’s “2008 China Industrial Trends” panel discussion. Participants in this survey were equally split between representatives of investment funds (hedge funds, private equity and venture capital) and industrial companies.
This week’s survey examines key themes impacting the “Year of the Rat”.
“2008 will be more profitable than 2007 for my company in China, however…………”
Across the board, the general sentiment of the respondents predicts a more profitable year for companies and funds surveyed. However, at the same time the majority (74%) of companies believe this year will be less profitable for their industry. Is this a case of confidence in their respective companies or an indicator of an underlining industry trend? New Pacific believes a little of both. It appears to be human nature that no matter the subject being surveyed most respondents believe they rank above average. However, the company types represented in this survey are not representative of the “average” company operating in China. Sounding Board members primarily come from firms that have achieved exceptional performance in China and the remaining respondents mainly represent large and successful companies in their sectors. This sample configuration and the “my company will do better than yours” tone becomes relevant because it indicates another key trend we are seeing in 2008; industry consolidation.
On the investment fund side predictions of increased profitability were slightly less pronounced. However, digging into the responses provided indicators of additional trends we expect to shape 2008. Over 80% of firms that have direct portfolio investments believe 2008 will be more profitable for their China portfolio companies. Also, although not included in the survey, many firms indicated that they will make more investments this year and that they will take out fewer gains than in the previous year.
“What will be the key trend affecting your China business in 2008?”
The top concerns of both investment funds and industrial companies can be summarized as high costs and uncertainty in global markets.
Stability of major markets
On both the investment and industry side it was clear that the respondents do not agree with the current popular theory that China is decoupled from the US economy or financial market. Although obvious China export implications remain a concern because of likely reduced US demand, most of the sounding board members are tackling issues that generate less press. On the industrial side a common complaint is that the weakening US economy has made global competitors increase their China focus and thus China becomes an even more competitive market for premium international players. On the investment side a similar sentiment that the market is exponentially more competitive for deals because of China’s relatively superior economic outlook. Another concern derived from weakening US markets was the ability or desire to consummate offerings and financing in the US.
Raw Material Costs
Predicting increased raw material prices in 2008 doesn’t take the clearest of crystal balls. This trend has been the story for the last few years and China’s increased demand has exacerbated the issue for companies manufacturing here. However, there was a clear consensus that 2008 will not see increases across the board and more divergence will appear. In 2007 it was a story of a tide that raised all ships, in 2008 materials such as copper and aluminum are expected to see sharp gains while nickel and zinc are expected to remain stable.
Among producers of manufactured products multiple respondents stated that in 2008 margins have reached narrowed to such an extent any cost increases will have to be directly passed on to the customer. While raw material prices have doubled and in some cases tripled in the last few years most manufactured product prices have remained the same or decreased as a result of increased competition. Either this is the year the cost/price squeeze gradually loosens its grip or the above prediction of increased profitability may be in jeopardy.
For full survey results and charts please go to:
http://www.newpacificconsulting.com/exec_poll_001.html
About New Pacific Consulting:
New Pacific Consulting is strictly focused on industrial growth strategy for investment funds and industrial corporations. Their consulting teams specialize in industrial materials & machinery, energy, chemicals, building, auto parts and paper.
Contact:
New Pacific Consulting
The Center
20/F, 989 ChangLe Rd
Shanghai, China, 200031
Phone: +8621 5116 6878
Fax: +8621 5116 6899
info@newpacificconsulting.com
###
This week’s survey examines key themes impacting the “Year of the Rat”.
“2008 will be more profitable than 2007 for my company in China, however…………”
Across the board, the general sentiment of the respondents predicts a more profitable year for companies and funds surveyed. However, at the same time the majority (74%) of companies believe this year will be less profitable for their industry. Is this a case of confidence in their respective companies or an indicator of an underlining industry trend? New Pacific believes a little of both. It appears to be human nature that no matter the subject being surveyed most respondents believe they rank above average. However, the company types represented in this survey are not representative of the “average” company operating in China. Sounding Board members primarily come from firms that have achieved exceptional performance in China and the remaining respondents mainly represent large and successful companies in their sectors. This sample configuration and the “my company will do better than yours” tone becomes relevant because it indicates another key trend we are seeing in 2008; industry consolidation.
On the investment fund side predictions of increased profitability were slightly less pronounced. However, digging into the responses provided indicators of additional trends we expect to shape 2008. Over 80% of firms that have direct portfolio investments believe 2008 will be more profitable for their China portfolio companies. Also, although not included in the survey, many firms indicated that they will make more investments this year and that they will take out fewer gains than in the previous year.
“What will be the key trend affecting your China business in 2008?”
The top concerns of both investment funds and industrial companies can be summarized as high costs and uncertainty in global markets.
Stability of major markets
On both the investment and industry side it was clear that the respondents do not agree with the current popular theory that China is decoupled from the US economy or financial market. Although obvious China export implications remain a concern because of likely reduced US demand, most of the sounding board members are tackling issues that generate less press. On the industrial side a common complaint is that the weakening US economy has made global competitors increase their China focus and thus China becomes an even more competitive market for premium international players. On the investment side a similar sentiment that the market is exponentially more competitive for deals because of China’s relatively superior economic outlook. Another concern derived from weakening US markets was the ability or desire to consummate offerings and financing in the US.
Raw Material Costs
Predicting increased raw material prices in 2008 doesn’t take the clearest of crystal balls. This trend has been the story for the last few years and China’s increased demand has exacerbated the issue for companies manufacturing here. However, there was a clear consensus that 2008 will not see increases across the board and more divergence will appear. In 2007 it was a story of a tide that raised all ships, in 2008 materials such as copper and aluminum are expected to see sharp gains while nickel and zinc are expected to remain stable.
Among producers of manufactured products multiple respondents stated that in 2008 margins have reached narrowed to such an extent any cost increases will have to be directly passed on to the customer. While raw material prices have doubled and in some cases tripled in the last few years most manufactured product prices have remained the same or decreased as a result of increased competition. Either this is the year the cost/price squeeze gradually loosens its grip or the above prediction of increased profitability may be in jeopardy.
For full survey results and charts please go to:
http://www.newpacificconsulting.com/exec_poll_001.html
About New Pacific Consulting:
New Pacific Consulting is strictly focused on industrial growth strategy for investment funds and industrial corporations. Their consulting teams specialize in industrial materials & machinery, energy, chemicals, building, auto parts and paper.
Contact:
New Pacific Consulting
The Center
20/F, 989 ChangLe Rd
Shanghai, China, 200031
Phone: +8621 5116 6878
Fax: +8621 5116 6899
info@newpacificconsulting.com
###
Contact
New Pacific Consulting
David Anderson
(8621)51166877
newpacificconsulting.com
David Anderson
(8621)51166877
newpacificconsulting.com
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